Monday, March 08, 2010

Ecology Economics, Environmental Economics and Free Market Environmentalism.

Recently I had an interesting conversation on Ecology Economics, Environmental Economics and Free Market Environmentalism but like a lot of good things it came to a crashing end. I find the people at ET to be much more open minded as well as informed which I hope can lead to some fruitful discussions here.
Let me start with a link to The Prize in Economics 2009 - Press Release for the award given to Elinor Ostrom.
Elinor Ostrom has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories. She observes that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest, and she characterizes the rules that promote successful outcomes.
One broad category that Ostrum studies under is called common goods. I could not find any stand alone papers by Ostrom but did find an introductory chapter in a book entitled Understanding Knowledge as a Commons; From Theory to Practice, Edited by Charlotte Hess and Elinor Ostrom. Starting on page 4 under the section "Study of Traditional Commons" seems to be the best overview of her theories as I have seen so far. {Please add more if you can find or know of any other source.} This is an excerpt of that section.
Commons analysts have often found it necessary to differentiate between a commons as a resource or resource system and a commons as a property-rights regime. Shared resource systems—called common-pool resources—are types of economic goods, independent of particular property rights. Common property on the other hand is a legal regime—a jointly owned legal set of rights (Bromley 1986; Ciriacy-Wantrup and Bishop 1975). Throughout this book, the more general term commons is preferred in order to describe the complexity and variability of knowledge and information as resources. Knowledge commons can consist of multiple types of goods and regimes and still have many characteristics of a commons.
Potential problems in the use, governance, and sustainability of a commons can be caused by some characteristic human behaviors that lead to social dilemmas such as competition for use, free riding, and overharvesting. Typical threats to knowledge commons are commodification or enclosure, pollution and degradation, and nonsustainability.

Self-organized commons require strong collective-action and selfgoverning mechanisms, as well as a high degree of social capital on the part of the stakeholders. Collective action arises “when the efforts of two or more individuals are needed to accomplish an outcome” (Sandler 1992, 1). Another important aspect of collective action is that it is voluntary on the part of each individual (Meinzen-Dick, Di Gregorio, and McCarthy 2004). Self-governance requires collective action combined with “knowledge and will on the one hand, and supporting and consistent institutional arrangements on the other hand.”3 Social capital refers to the aggregate value of social networks (i.e., who people know), and the inclinations that arise from these networks for people to do things for each other (i.e., the norms of reciprocity) (Putnam 2000). Throughout this book we will see these three elements—collective action, selfgovernance, and social capital—frequently in play.

One of the truly important findings in the traditional commons research was the identification of design principles of robust, long-enduring, common-pool resource institutions (Ostrom 1990, 90–102).
These principles are
• Clearly defined boundaries should be in place.
• Rules in use are well matched to local needs and conditions.
• Individuals affected by these rules can usually participate in modifying the rules.
• The right of community members to devise their own rules is respected by external authorities.
• A system for self-monitoring members’ behavior has been established.
• A graduated system of sanctions is available.
• Community members have access to low-cost conflict-resolution mechanisms.
• Nested enterprises—that is, appropriation, provision, monitoring and sanctioning, conflict resolution, and other governance activities—are organized in a nested structure with multiple layers of activities.

I think from that I get a good idea what Ostrom's models are based upon. The ISEE {The International Society for Ecological Economics} also had a press release regarding Ostrom's Noble Prize at The 2009 Nobel Prize and the Coming of age of Ecological Economics.
Ecological economists long have cherished Elinor Ostrom’s powerful intellect and constructive camaraderie. She serves on the editorial board of Ecological Economics, and has published in Ecological Economics, participated in many ecological economics meetings, and co-authored with Daniel Bromley, Robert Costanza, Carl Folke, Marco Jannsen, Richard Norgaard, Stephen Schneider, and surely many others who contribute to our broad field. This is a Nobel Prize we can be proud of.

I present that portion to present her credentials in regards to ecological economics. My studying has mostly been along of "environmental economics" or more specifically "free-market environmentalism" where property rights is strongly emphasized. From that perspective then looking Ostrom's list of design principles for common-pool resource institutions, I see a lot of elements that enforce or protect "property rights" of the owners and in this case the collective. For more thoughts on "free-market environmentalism" let me include a few links:
Free-Market Environmentalism: The Concise Encyclopedia of Economics | Library of Economics and Liberty
Free-Market Environmentalism
I also strongly recommend the book "Free Market Environmentalism" by Terry Anderson and Donald Leal.

Maybe this is getting off the main subjects here in this diary, but since I brought up ISEE earlier in this diary I wanted to include a link to its useful library at: ISEE - Encyclopedia. Lots of interesting subjects there. I found the piece on Environmental Kuznets Curve
{} quite interesting and I read it along with a couple of other papers. I studied about the first Kuznets curve in development economics and the theories about the environment and development were developed as an afterthought, so I was intrigued by the these new developments of the Kuznets curves. Econometrically speaking they {the first Kuznets curves that refer to inequality of earnings and stages of development and there are more than one model developed through the ages} tend to be very weak but a subject well worth studying. Yes my opinion on the need to study something that is not universal but it helps develop economics by even building models that are not necessarily robust. It does appear that China and India are both experiencing a Kuznet curve in both equality and the environment. Let me also include a small quote from class notes on the original Kuznets curve.
Kuznets and the Historical Record
Let us first turn to the experience of the now-developed countries in that early phase of their development that might be seen as comparable with what is happening in
contemporary poor countries. This will provide us with some historical perspective
on the problem of income distribution. The classic pioneering work here is that of
Simon Kuznets (1955). His careful and systematic analysis of somewhat fragmentary
data for a number of now advanced capitalist countries (the USA, UK and Germany),
in an attempt to compare historical trends and establish the general record, has been
very influential among development economists.

From his analysis, Kuznets offers the cautious hypothesis that one might assume a
long swing in the inequality characterising the secular income structure:
• widening in the early phases of economic growth when the transition from the pre-industrial phase is most rapid
• a temporary stabilisation of the possibly substantial widening in income inequality of the early period
• and then a narrowing of income inequality in the later phases.
It is the early phase that interests us. And we need to focus on the question of
whether the pattern shown by the older developed countries is likely to be repeated
in the sense that, in the early phases of industrialisation in the underdeveloped
countries, income inequalities will tend to widen before various levelling forces
become strong enough, first to stabilise, and then reduce income inequalities.
Kuznets places the early phase in which income inequality might have been widening
from about 1780 to 1850 in Britain; from about 1840 to 1890 in the USA; and from the
1840s to the 1890s in Germany. He suggests that a narrowing of income inequality
possibly began towards the end of the nineteenth century in the UK, and around the
time of the First World War in the USA and Germany.
The prognosis for poor countries attempting industrialisation and capitalist economic
development (and assuming some success in repeating past patterns of development)
is not, then, a good one with respect to the possibility of narrowing inequality. A halfcentury or more of widening inequality can be expected on the basis of the historical figures. Indeed, Kuznets notes that the size distribution of income in less developed countries was more unequal than in the developed countries during the post World War II period.
This experience has been encapsulated in the so-called Kuznets curve, or the U-shaped
Kuznets curve, which simply puts in graphical form Kuznets’ conclusion regarding the
experience of the now advanced countries. The graph shows that as per capita income
rises, the income share of the top 20% of income recipients first rises quite rapidly, stabilises at around 57 per cent, and then falls more slowly.

Is there any other paper at ISEE that might be of interest to the group?
PS: Only a few brain cells were damaged in the making of this diary...

charlotte said...

FYI: There are 117 full-text open access papers by Elinor Ostrom (including her dissertation) on the Digital Library of the Commons at
charlotte hess

Thanks Charlotte. Not sure if I have any time to explore all of them as still doing some studying for test in October. Here is the link to her documents {118 recorded as of 6-24-2010}.
Browse by Author "Ostrom, Elinor"